Infosys is evaluating a dozen more startups - all aimed not at bulking revenues or adding clients, but at gaining cutting-edge technology such as automation and artificial intelligenceBENGALURU: Infosys may need to lower its revenue guidance for fiscal 2017 yet again, Chief Executive Officer Vishal Sikka said on Thursday, portending difficult times for India’s second-largest software company and an industry which has been the engine of job growth for nearly two decades.

In sounding the warning, Sikka, the first non-founder CEO of Infosys, blamed a deteriorating demand environment for software services and the negative fallout from the British exit from the European Union.

He did not say when a lower revenue forecast would be announced, or how much it could be.

"I can tell you that the second quarter will be better. But we are seeing some risks that could lead to a downward revision of the guidance because the environment has worsened as we have gone into the quarter," Sikka said at the JPMorgan Investor Summit in New Delhi.

In July, Infosys unexpectedly lowered revenue guidance citing under-performance in some parts of the business. Now, Sikka, a former SAP technology chief who has led the company since August 2014, is indicating that there are bigger problem areas.

Taken together with the steady drumbeat of negative news from peers, analysts are wondering about what this implies for the sector. Indian software and services companies, which employ some 4 million people, have been paring expectations citing weakness in demand as they also cope with a technology landscape which is being radically reshaped by automation.

Joining Infosys in their downbeat assessment of market for the immediate future are Cognizant, market leader Tata Consultancy Services and Mindtree. Cognizant has already lowered it guidance twice this year and issued a profit warning.

"It was bad that it was BFSI (Banking, Financial Services and Insurance) that was struggling," said an analyst at a Mumbai brokerage who tracks the software services sector. "But now they seem to be saying that other segments are not doing well."

Infosys had cut its FY17 guidance in July to 10.5-12 per cent in constant currency terms from the 11.5-13.5 per cent it had projected at the end of the last financial year.

Sikka also noted that even though the United Kingdom had already voted to leave the European Union when the company had initially lowered its guidance, the implications of Brexit had not been factored into the revised figure.

Analysts have been arguing that Infosys is likely to cut its forecast once more ever since its multi-million pound deal with Royal Bank of Scotland was terminated in August this year.

The National Association of Software and Services Companies is widely expected to cut its industry growth guidance of 10-12 per cent growth in FY17 towards the end of the calendar year.

"We believe Infosys will lower its revenue growth guidance by at least 150 basis points to 200 bps and possibly err on the side of conservativeness as it may not want to cut numbers a third time in an uncertain macro and industry environment," Girish Pai, analyst with Nirmal Bang, said in a note last month.

Sikka admitted that BFSI was weak but said the situation was not as bad as it was being made out to be.

"We do see challenges in BFSI but not near the level that the other guys have talked about. I think all of us tend of overstate macroeconomic factors. We have such tiny amount of client budgets and IT spends that there is lots of room for growth," he said.

TCS has said before that it was seeing Brexit-related softness in banking and financial services, which would slow its growth momentum in the current quarter.

Analysts at the Investor Summit also grilled Sikka on revenue productivity which, currently under $50,000 per employee, had not increased substantially despite the focus on automation.

"The cost pressure has outpaced our productivity improvements and we need to find our escape velocity to get ahead of that," Sikka said.

He also ruled out the possibility of large acquisitions that would help power annual revenue from under $10 billion currently to $20 billion by 2020.

"We do not believe in handing over control over our existence to another company. We have a belief that the companies we buy should accelerate our growth in certain newer areas. And that we should have a cultural match with the founders. This typically would not include larger companies," Infosys CEO said at the event.

He added that based on the company’s projection of achieving $1.5 billion in revenue inorganically, it would likely have to spend between $3-4 billion on acquisitions which would be funded from cash on hand.

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As the Special Chief Secretary & IT Advisor to the Chief Minister - Govt. of Andhra Pradesh, J A Chowdary is all for chasing new growth horizons, pursuing radically different development approaches and outguessing technology trends that will shape the future.

As the Special Chief Secretary & IT Advisor to the Chief Minister - Govt. of Andhra Pradesh, J A Chowdary is all for chasing new growth horizons, pursuing radically different development approaches and outguessing technology trends that will shape the future.